New York, Fauji Fertilizer Company Ltd. (FFC), a major player in the fertilizer industry, recently held an analyst briefing to discuss their CY23 financial performance and future business outlook, revealing significant growth and strategic initiatives.
According to AKD Securities Limited, FFC's unconsolidated earnings for CY23 were reported at PkR29.7 billion, marking a 48% year-on-year increase. This growth was primarily driven by improved gross margins resulting from high retention prices. The company's earnings from core operations saw a significant jump to PkR17.8 billion from PkR8.5 billion in the previous year, while earnings from investments and dividends remained stable at around PkR11.8 billion.
The company achieved a record urea production of 2,521 kilotons in CY23, the highest since CY18, along with a 1% increase in urea market share, reaching 38%. However, its DAP market share remained unchanged at 6%. On the inventory front, the overall industry-wide urea inventory saw a decrease to 95 kilotons from an opening inventory of 249 kilotons.
FFC's management also highlighted a 48% year-on-year increase in freight costs due to the implementation of axle load regulations.
In terms of subsidiaries, FFC's wind farms reported a 31% growth in profitability in CY23. Fauji Fresh and Freeze improved its gross profits to 17%, up from 12% in CY22, despite a significant drop in volumes in the last quarter due to conflict in the Middle East. Management remains optimistic about achieving profitability from this subsidiary in the coming year.
The briefing also shed light on FFC's involvement in the Pressure Enhancement Facility (PEF) at the MARI delivery node. With a total CAPEX of US$53 million, FFC's share amounts to US$25 million. Approximately 20-25km of the 88km piping for phase 1 is completed, and the project is expected to be operational by the start of CY26.
Furthermore, the company is set to commence execution work on the SNGP pipeline project by the end of February, with completion anticipated by the end of the current calendar year. The project's total cost is estimated at around PkR2.0 billion.